WASHINGTON – After striking an elusive nuclear deal with Iran, the Obama administration is in a dilemma in the beginning of 2016: Iran was promised access to the long-frozen reserves abroad, including $5.7 billion stuck in an Omani bank.
To spend it, Iran wanted to convert the money into US dollars and then the euro, but the top U.S. officials had repeatedly promised Congress that Iran would never gain access to America’s financial system.
This insurance is in derogation of the Obama administration secretly issued a permit to allow Iran to circumvent U.S. sanctions for the short time that is needed to convert the funds through a U.s. bank, an investigation by the Senate Republicans released Wednesday showed. The plan failed when two AMERICAN banks refused to take part.
Two years later, the revelation has re-ignited the bitter debate over the nuclear deal and the former President Barack Obama was eager to grant concessions to Tehran.
“The Obama administration is the American people, deceived Congress, because they were desperate for a deal with Iran,” said Sen. Rob Portman, R-Ohio, who is the chairman of the Senate panel that conducted the research.
And Republican Rep. Ed Royce, House Foreign Affairs chairman of the Committee, accused Obama of trying to “hide a secret push to give the ayatollah access to the AMERICAN dollar.”
Not so, the former Obama administration officials said, arguing that the decision to grant the license to the spirt of the deal, which included allowing Iran to regain access to the external reserves that is off-limits due to U.S. sanctions. They said that the public the assurance that Iran would be held are focused on the removal of false reports about non-existent proposals, which would have gone much further by letting Iran actually buy or sell things in dollars.
The former Obama officials disputed that the temporary access to the AMERICAN banks to convert funds using the dollar constituted “access to the U.S. financial system.” What’s more, they rejected the report as another example of a wrong approach to Iran policy by the Republicans and the President, Donald Trump, who last month drew the V. S. of the landmark 2015 nuclear agreement.
“They continue to malign the deal in an attempt to justify President Trump’ s decision not to justify,” said Ned Price, who was Obama’s White House, the National Security Council spokesman, referring to GOP lawmakers.
Still, the report of the Senate Permanent Subcommittee on Investigations sheds light on the delicate balance of the Obama administration prompted the strike after the deal, as it worked to ensure Iran received the promised benefits without having to play in the hands of the opponents. In the midst of a tense political climate, Iran hawks in the U.S., Israel and elsewhere argued that the United States gave up too much to Tehran and that the windfall would be used for the financing of extremism and other troubling Iranian activity.
The Treasury Department issued driving licence in February 2016, and will never be released, would have allowed Iran to convert $5.7 billion held in Oman’s Bank of Muscat from Omani rials in euro by the exchange of them first in dollars. As the Omani bank had allowed the exchange without such a permit would have violated sanctions that bar Iran from transactions of the AMERICAN financial system.
The situation is a result of the fact that Iran already saved billions on Omani rials, a currency that is notoriously difficult to convert. The U.S. dollar is the world’s dominant currency, so it can be used as a conversion tool for the Iranian assets was the easiest and most efficient way to increase the speed of Iran’s access to the equity.
“Yikes,” a former Treasury official told colleagues in an e-mail, as described in the report. “It seems that we are determined to get a whole lot further than just allowing the immobilized funds to establish themselves.”
The Obama administration approached two AMERICAN banks to facilitate the conversion, the report said, but both refused, stating the name and the reputation risk of doing business with Iran.
The issue of the permit was not illegal. Still, it went above and beyond what the Obama administration had to do under the terms of the nuclear agreement, which the U.S. and world powers gave Iran billions of dollars in sanctions relief in exchange for curbing its nuclear program.
The license issued to the Bank of Muscat stood in stark contrast with the repeated statements from the Obama White House, the ministry of finance and the Ministry of foreign affairs, all of which denied that the government is considering allowing Iran access to the U.S. financial system.
But almost immediately after the sanctions relief came into force in January 2016, Iran began to complain that it does not take advantage of the benefits it had in mind. Iran suggested that other sanctions — such as those related to human rights, terrorism and the rocket were to scare off potential investors and banks, who were afraid for any business with Iran would lead to punishment. The global financial system is strongly intertwined with the US banks, making it almost impossible to control the behavior of many international transactions without the touch of New York in one way or another.
If the Obama administration thought about how to deal with Iran complaints in 2016, reports The Associated Press and other media revealed that the US is considering more sanctions relief, including the issuance of permits that allows Iran limited transactions in dollars. Democratic and Republican legislators argued against it in the late winter, spring and summer of 2016. They warned that, unless Tehran was willing to more, the US should not give Iran a little more than it already was.
At the moment, that the Obama administration played down those concerns, while speaking in general terms about the need for the US to be part of the deal. Minister of foreign affairs John Kerry and other top aides fanned out across Europe, Asia and the Middle East trying to convince the banks and companies they could do business with Iran without violating sanctions and facing steep fines.
“Since Iran is held the end of the deal, it is our responsibility to keep us, both in letter and spirit,” Minister of finance Jack Lew said in March 2016, without offering information.
That same week, the AP reported that the Treasury had prepared a draft of a license would have given Iran much broader permission to convert its assets in foreign currencies in easier to spend to the currencies as euro, japanese yen, or rupees, by first exchanging them for dollars in offshore financial institutions.
The design started from a general license, a blanket deal that ensures that all transactions of a certain type, instead of a specific license to Oman’s Bank Muscat, which relate only to specific transactions and settings. The proposal would have allowed dollars to be used in the exchange of money on the condition that there are no Iranian banks, not Iranian rials and not sanctioned Iranian persons or companies were involved, and that the transaction did not begin or end in US dollars.
Obama administration officials at the time assured concerned legislators that a general licence would not come. But the report of the Republican members of the Senate panel showed that a draft of the license is indeed prepared, but it was never published.
And when questioned by lawmakers about the possibility of granting Iran a kind of access to the U.S. financial system, the Obama-era civil servants never volunteered that the specific license for Bank Muscat in Oman had issued two months earlier.
According to the report, Iran is believed to have been found in other ways are to access money, where necessary, by the exchange of the in smaller amounts by means of a different currency.